Here Are 6 Things That Can
Derail Your Retirement Plan
Planning
for retirement involves a lot of to-dos -- everything from assessing your
lineup of mutual funds to determining a
retirement saving goal appropriate for your personal objectives.
But as you approach that retirement date, which has for so long seemed like a
mirage in the desert, it's common for your excitement to be sidelined by a rush
of questions, the biggest one being, "How much can I really afford to
spend?"
To truly get a picture of what you're able to pay out in your
golden years, you need to create a retirement spending budget long before you
actually stop working. To cover your bases, make sure you account for the
unexpected, such as the following.
A struggling relative
A 2013 Merrill Lynch and Age Wave survey showed that 62% of
people over 50 had given financial assistance to a family member in the
previous five years. It stands to reason that many of you nearing retirement --
or already in retirement -- will be faced with this situation at some point.
Deciding to help a friend or family member in need is a personal choice, but
try to heed this advice: Set repayment terms and never lend money you can't
afford not to get back.
Repairs, maintenance, and replacements
During retirement, you will inevitably run into some big
expenses involving the big-ticket items you own. Your car will need servicing,
your roof might need repairing, and those kitchen appliances won't last
forever. Factoring these expenses into your retirement plan will help you avoid
the sticker shock of having to replace the furnace or central air conditioning.
Fido's medical care
Pet-care expenses increased by 87% between 2001 and 2012, and
given that 68% of American households have at least one pet, chances are you'll
need to budget for the care and treatment of your furry friend. If your pet
requires surgery at any time for illness or injury, it could cost thousands of
dollars. Build these potential expenses into your budget and consider investing
in pet insurance -- or even socking away money for pet expenses in a separate
emergency fund.
Next
up, having a plan for your retirement savings -- before it's time to take distributions --
will help you avoid burning through the money you spent years saving. Once you
have a spending budget in place, here are some retirement account mistakes
you'll want to avoid.
Getting dinged by the IRS because of your required minimum
distribution
An RMD is the minimum amount
anyone over the age of 70-1/2 is required to withdraw annually from their
retirement accounts (although RMD rules do not apply to Roth IRAs while the
account owner is alive). Every year, thousands of people fail to take RMDs,
incurring a 50% tax on the amount that was supposed to be withdrawn. Your plan custodian
or administrator can usually help calculate your RMD, but it's ultimately up to
you to ensure you withdraw the correct amount each year by the deadline
(typically Dec. 31, but for those first turning 70-1/2, this can be delayed
until April 1 of the following year).
Failing to stay invested as a retiree
Now that we're living longer, it's easy to see that we'll need to make our
money last longer, too. As such, you'll need the extra growth potential from
continuing to invest in a mix of stocks and bonds. You don't want to get too
conservative as you approach retirement, or you may risk outliving your
savings.
Spending too much of your gains in an up market
It's easy to feel comfortable and "splurge" when the market performs
well. But if the stock market goes up 30% or more (as some stock market indexes
did in 2013), that doesn't mean you should go on a shopping spree. Continuing
to live on the same fixed budget will help cover you during the next
"problem" year.
You
only get one shot at retirement, and you deserve to get it right. If you're
concerned about your distribution strategy or how to stay invested in your
golden years, contact a Professional investment advisor who can help you design a plan based
on your individual situation.
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